ANTI-COUNTERFEITING K

AUTHORS

LLiissaa PPeeeettss leads the European IP PolicyGroup at Covington & Burling. Herpractice focuses on intellectual propertyand information technology, andembraces both legislative advocacy andIP enforcement. In this context, she hasworked closely with leading technologyindustry clients, including many of theworld’s best-known software andhardware companies.

MMaarrkk YYoouunngg is an associate in thetechnology and media group in theLondon office of Covington & Burling.His practice focuses on intellectualproperty, information technology anddata protection law, and encompasseslegislative advocacy, IP enforcement,regulatory compliance andtransactional work.

K The Anti-Counterfeiting Trade Agreement (ACTA)

W ith courts and parliaments

closing for several weeks, people

drifting off on vacation, and all

change at the Commission next year, one

might have expected little activity on the IP

policy front this summer. Nothing could

have been further from the truth, however.

Within the space of only a few weeks in July

and August there was a near flood of

communications and consultation documents:

the Commission published its long-awaited

Communication on an industrial property

rights strategy for Europe (addressing

enforcement against counterfeiting, amongst

other things)1 and a Green Paper on

Copyright in the Knowledge Economy;2 the

European Economic and Social Committee

released an opinion on new trade agreement

negotiations, which includes

recommendations to strengthen IPR

provisions and enforcement activity in future

bilateral and regional trade agreements;3 the

UK Government adopted a consultation on

legislative options to address illicit peer-to-

peer file-sharing having brokered a

‘Memorandum of Understanding’ between

UK ISPs and the music and movie

industries;4 and the UK Intellectual Property

Office announced a new consultation on

penalties for copyright infringement.5

And meanwhile, over and above these

European and more local UK issues,

rumblings about a new international trade

agreement regarding counterfeiting and

piracy continued. The Anti-Counterfeiting

Trade Agreement (ACTA) has attracted

worldwide press attention, which is

unsurprising given that it represents a rare

and significant opportunity to achieve

international consensus on increased IPR

protections in the near-term. The proposed

agreement is an important development that

trademark and other rights owners should be

following and actively supporting.

Origins of ACTA

While the G8 gave early indications relating

to various IPR initiatives,6 the first public

statement about ACTA was not made until

October 2007, when the United States’ trade

ministry – the Office of the U.S. Trade

Representative (USTR) – announced that the

United States and some of its key trading

partners would seek to negotiate an anti-

counterfeiting trade agreement.7 This was

echoed by other agencies of participating

nations around the world,8 which at the

outset included Canada, the European Union,

Japan, South Korea, Mexico, New Zealand,

and Switzerland.

ACTA was described as a leadership effort

by nations committed to strong IPR

protection, which aimed to raise the

international standard for IPR enforcement

www.ipworld.com Trademark World #211 | October 2008 | 33

By Lisa Peets and Mark Young of Covington & Burling LLP

IN SUMMARY

– The proposed Anti-Counterfeiting Trade

Agreement (ACTA) is an important

development that trademark and other

rights owners should be following and

actively supporting

–Right holders whose bottom line is

affected drastically by counterfeiting and

piracy should take every opportunity to

engage in the process by mobilising

effectively to make their wishes known

to their national representatives

participating in the negotiations

A new

opportunity

in the fight

against fakes

A new

opportunity

in the fight

against fakes

to address current challenges of

counterfeiting and piracy. Instead of seeking

to amend the Agreement on Trade-Related

Aspects of Intellectual Property Rights

(TRIPS), USTR expressed the hope that this

new plurilateral trade agreement would “set

a new, higher benchmark for enforcement

that countries can join on a voluntary basis”.9

From the U.S. perspective, ACTA also is

intended to complement other trade policy

tools that USTR uses to protect U.S.

intellectual property overseas, such as free

trade agreements, World Trade Organisation

accession negotiations, and the Special 301

process.10 Similarly, the European

Commission expressed the view that ACTA

would strengthen efforts to protect European

intellectual property around the world, a

key objective of the EU’s Global Europe

trade strategy.11

Provisions and developments

According to the initial press releases and a

USTR fact sheet,12 the envisioned agreement

would include commitments in three areas:

Strengthening international cooperation.

Recognising that information-sharing and

greater cooperation among law enforcement

authorities (including customs) is essential to

combating international counterfeiting

operations, the negotiators put capacity

building and technical assistance in improving

enforcement first on the ACTA agenda.

Improving enforcement practices.

ACTA also has been envisaged as providing

an opportunity to establish “best practices” in

terms of enforcement, by fostering specialised

intellectual property expertise within law

enforcement agencies to ensure effective

handling of IPR cases and by raising public

awareness about the vital role IPR plays in

modern economies and the damage caused by

widespread counterfeiting and piracy.

Providing a strong legal framework for

IPR enforcement.

Acknowledging the importance of a strong

legal framework to underpin all of these

efforts, USTR suggested possible provisions

would include measures on both criminal and

civil enforcement, optical disc piracy, border

measures, and internet distribution.13

Following the initial public announcement last

year, other countries including Australia,

Jordan, Morocco, Singapore and the United

Arab Emirates have joined the ACTA

negotiations, which have been progressed

recently at a June meeting in Geneva, and in

July both at the G8 Hokkaido Toyako Summit

Meeting and later in the month in

Washington DC. While there have been

complaints from certain quarters regarding

the transparency of the negotiation process,14

stakeholders have had a degree of opportunity

to provide input. USTR, for example,

published a notice in the Federal Register in

February requesting public comments on

“specific matters that should be the focus of

[ACTA]”,15 and on July 8 posted four

volumes of public submissions on its website.16

Outside of the United States there have been

consultations and meetings about ACTA,

albeit on perhaps a surprisingly small scale.

The Australian Department of Foreign Affairs

and Trade issued a Discussion Paper in

November on whether Australia should join

the negotiations, in Europe the Directorate

General for Trade of the Commission

organised an afternoon meeting in Brussels on

23 June and invited interested parties to

present their positions in writing,17 and

Foreign Affairs and International Trade

Canada held a consultation in April.18

Because no drafts of the agreement itself

have been released, however, the available

information on specific topics being negotiated

is limited. Our analysis therefore derives from

leaked papers and is surmised from

submissions that interested parties have made

to consultations. Among these, a leaked

discussion paper from the negotiating parties

(the author is unclear) published on May 22

on Sunshine Media’s wikileags.org website

repeats the three broad categories of agenda

items outlined above – international

cooperation, enforcement practices and legal

framework – and identifies more specific

examples of provisions that could be included

in the new agreement.19 These include such

proposals as a provision criminalising IPR

infringements “on a commercial scale”, which

the paper describes as including “significant

wilful infringement without

motivation for financial gain to

such an extent as to

prejudicially affect the

copyright owner”. Given

disagreements over the

definition of “commercial scale”

in some markets – with some

suggesting that the term,

which derives from Article 61

of the TRIPS Agreement,

should be limited to

infringements undertaken for

profit – the proposed ACTA

definition would be a welcome

development for right holders.

Indeed the question of how to

define “commercial scale” was

recently at issue in the EU, in

the context of the proposed

Directive to harmonise criminal

sanctions for IP infringements.

European Parliamentarians had

proposed amending the

K ANTI-COUNTERFEITING

34 | Trademark World #211 | October 2008 www.ipworld.com

www.ipworld.com Trademark World #211 | October 2008 | 35

Directive, which has been on the back-burner

for over a year, to include a definition of

infringement on a “commercial scale” that

would limit the phrase to cover only

infringements “committed to obtain a

commercial advantage”. This would have

excluded some of the most serious infringers

from the Directive’s scope, including so-called

“release groups” who some estimate are

responsible for up to 90% of Internet piracy.

These groups, rather than pursuing any

commercial purpose, thrive on the simple

notoriety of being the first to make

unauthorized copies of copyright works

available for further unlawful distribution on

the internet. Although such activity is

unmotivated by profits, it takes place on a

commercial scale and has the same impact on

right holders as for-profit piracy.

ACTA discussions also appear to include a

proposal to address “knowingly trafficking in

counterfeit labels which are intended to be

used on protected goods.” This would be a

welcome development for many brand owners,

who experience significant problems both with

‘counterfeit’ labels that appear to be genuine

but are not, and also with ‘illicit’ labels that are

genuine authentication documents obtained

through illicit means (e.g., theft or fraud) and

fraudulently bundled with counterfeits or other

unauthorised copies. While some countries

already have laws that could provide the basis

for imposing criminal penalties on trafficking

in counterfeit labels (at least in certain cases),

the position regarding criminalising trafficking

in illicit labels appears less certain.

Another eye-catching element of the legal

framework part of the leaked discussion paper

relates to civil enforcement and the proposal to

introduce “[d]amages to compensate,

including measures to overcome the problem

of right holders not being able to get sufficient

compensation due to difficulty in assessing the

full extent of the damage”. This appears to be

aimed at introducing pre-established or

statutory damages, or a statutory formula to

calculate damages with a view to arriving at

fines that are likely to act as a deterrent to

counterfeiters and pirates (as required under

the WTO TRIPS Agreement) – critically

necessary, given that current damages regimes

often result in awards far lower than the actual

losses to right holders and actual profits of

certain infringers. Border measures also are

high on the agenda, including ex officio

authority for customs authorities to suspend

import, export and trans-shipment of

suspected IPR infringing goods, and authority

to impose deterrent penalties. Several

interested parties including the International

Trademark Association have expressed

support for such measures, which would help

to disrupt the flow of counterfeit goods.20

One issue that did not feature prominently

in the discussion paper, but which is a top

priority for some in the right holder

community, is secondary liability and an

increased onus on ISPs to detect online

copyright infringement.21 The discussion

paper proposes that there should be

“safeguards for Internet service providers

(ISPs) from liability, to encourage ISPs to

cooperate with right holders in the removal

of infringing material”. This encouragement

of voluntary, industry-led cooperation will

certainly be welcomed by many internet

stakeholders – particularly given efforts in

some markets, such as France, to compel ISPs

and technology providers to detect, intercept

and/or prevent online infringement. Some

sectors have questioned the efficacy of such

proposals, given that government regulations

are not apt to keep pace with technological

change. Other opponents have raised equally

important issues ranging from user privacy to

due process, and questioned whether ISPs

should police the interests of other third

party right holders.

A further issue that is a high priority for

right holders but that was not mentioned in

the discussion paper relates to the processing

and collection of internet protocol (IP)

addresses in the context of investigating

piracy. As it is possible to detect online

infringement by monitoring the distribution

of unauthorised content over peer-to-peer

networks and potentially identify participants

by their IP addresses, many right holders

argue that online enforcement is impeded by

privacy authorities that deem IP addresses to

be personal data and therefore subject to

stringent data protection rules. This issue is

complicated by the differing approaches taken

towards data privacy in the U.S. and in

Europe, but it may benefit right holders if the

proposed agreement were to address the issue

regarding IP addresses.

The negotiating process and the position

of the European Commission

As stated at the outset, the goal of the

negotiating parties is to provide a high-level

international framework that strengthens the

global enforcement of intellectual property

rights and assists in the fight to protect

consumers from the health and safety risks

associated with many counterfeit products. In

short, the hope is that the agreement will

create a new global “gold standard” on IPR

enforcement.22 While some in the IP

community have expressed concern about the

negotiations not taking place within

established international policymaking fora

that permit greater transparency such as the

WIPO or the WTO,23 the European

Commission has been open from day one that

“the approach of a free-standing agreement

gives us the most flexibility to pursue this

project among interested countries”, and that

while it “fully supports the important work of

the G8, WTO, and WIPO”, it believes that

“membership and priorities of those

organizations simply are not the most

conducive to this kind of path breaking

project”.24 In light of this objective and the

ambition of the negotiators, there clearly is a

real opportunity for right holders to achieve

new IPR enforcement standards via the

proposed agreement.

Despite Europe’s high aspirations for the

agreement, however, the EU’s involvement in

the ACTA negotiations has been complicated

by a tussle between the Commission, Member

States and the EU Presidency over who

should have a seat at the negotiating table,

and by a more fundamental question over

whether the Commission has the competence

to negotiate criminal measures on behalf of

Member States. This latter issue depends on

the scope of the Commission’s negotiating

authority with respect to ACTA, and on the

extent of the Commission’s authority to

direct the Member States to implement any

criminal measures so negotiated.

Generally, issues relating to criminal

measures have been deemed to be within the

“competence” of the EU’s Member States. A

recent decision by the European Court of

Justice indicates that the Commission does

have some authority in this regard, however.

European Commission v European Council25

suggests that while, as a general rule, criminal

law and procedure fall outside Community

competence, the Commission may direct

Member States to impose criminal penalties

on conduct that otherwise falls within the

scope of the Commission’s authority to

regulate.26 In addition, in an earlier decision,

the ECJ confirmed that the Commission, as an

institutional matter, has the authority to

negotiate international agreements on IPR

protection, even where such agreement

includes commitments to adopt criminal

measures.27 Ultimately, the Commission’s

ability to negotiate the criminal measures in

the context of an international treaty is

determined by the negotiating mandate issued

ANTI-COUNTERFEITING KBuilding trademark expertise since 1986

36 | Trademark World #211 | October 2008 www.ipworld.com

by the Council of the European Union before

the onset of negotiations. The Council’s

mandate to the Commission with regard to

the ACTA negotiations is confidential, which

is customary practice. That said, there is no

indication that this mandate limits or bars the

Commission from negotiating or accepting

criminal measures in ACTA.

Next steps and timing

In their Declaration on the World Economy

following the Hokkaido Toyako Summit

Meeting in July, G8 members expressed

support for the “acceleration of negotiations

to establish a new international legal

framework [ACTA]” and the wish “to

complete the negotiation by the end of this

year”.28 Participants in the negotiation held

later in the month in Washington DC

welcomed this statement of support, and were

reported to have progressed discussions of

the proposed agreement by focusing on civil

remedies for infringements of intellectual

property rights, including such issues as

availability of preliminary measures,

preservation of evidence, damages, and legal

fees and costs. Participants also continued

their previous discussions of border

enforcement of intellectual property rights.29

Although the G8’s preferred timescale may

be unrealistic and unnerves many who feel too

little is known currently about the substance

of ACTA, the commitment of participating

nations to continue consulting with

stakeholders through domestic processes and

to continue exploring opportunities for

stakeholder consultations is very welcome.30

Right holders whose bottom line is affected

drastically by counterfeiting and piracy should

take every opportunity to engage in the

process by mobilising effectively to make their

wishes known to their national representatives

participating in the negotiations. This should

happen now in time for the next round of

meetings, which at the time of writing has

tentatively been scheduled for October. K

Notes

1 See http://ec.europa.eu/internal_market/

indprop/rights/index_en.htm

2 See http://ec.europa.eu/internal_market/

copyright/docs/

copyright infso/greenpaper_en.pdf

3 See http://eur-lex.europa.eu/LexUriServ/

LexUriServ.do?uri=

OJ:C:2008:211:0082:0089:EN:PDF

4 See http://www.berr.gov.uk/consultations/

page47141.html

5 See http://www.ipo.gov.uk/about/about-

consult/about-formal/about-formal-

current/consult-gowers36.htm

6 Reports based on freedom of information

requests also state that internal discussions

on ACTA started in 2006, see

http://www.thestar.com/sciencetech/

article/439551

7 USTR press release dated October 23, 2007

at http://www.ustr.gov/Document_Library/

Press_Releases/2007/October/

Ambassador_Schwab_Announces_US_

Will_Seek_New_Trade_Agreement_to_

Fight_Fakes.html?ht=

8 See, for example, European Commission

press release of the same date at

http://europa.eu/rapid/pressReleasesAction.d

o?reference=IP/07/1573&format=HTML&aged

=1&language=EN&guiLanguage=en

9 USTR press release, supra n.7.

10 See our article in the July/August edition of

Trademark World for an overview and

analysis of this year’s Special 301 Report.

11 European Commission press release, supra

n.8.

12 USTR press release and Commission press

release, supra nos. 7 & 8, and USTR Fact

Sheet: Anti-Counterfeiting Trade Agreement

at http://www.ustr.gov/assets/

Document_Library/Reports_Publications/

2007/asset_upload_file122_13414.pdf

13 Id.

14 See, for example, law professor Michael

Geist’s submission to the Foreign Affairs and

International Trade Canada consultation on

ACTA, in which he criticises the

developments for lacking transparency and

for excluding civil society groups and

developing countries,

http://www.michaelgeist.ca/content/

view/2898/125/

15 Anti-Counterfeiting Trade Agreement (ACTA):

Request for Public Comments 73 Fed. Reg.

8910 (Feb. 10, 2008).

16 http://www.ustr.gov/Trade_Sectors/

Intellectual_Property/IP_Federal_Register

_Notices/Section_Index.html

17 http://ec.europa.eu/trade/issues/

sectoral/intell_property/pr010704_en.htm

18 http://www.international.gc.ca/

consultations/closed-anterieures2.aspx?

lang=eng#acta

19 http://wikileaks.org/wiki/G-

8_plurilateral_intellectual_property_trade

_agreement_discussion_paper; paper at

http://file.sunshinepress.org:54445/acta-

proposal-2007.pdf

20 See INTA - BASCAP view on ACTA process,

March 3, 2008, pages 10-12 of

http://www.ustr.gov/assets/Document_Library

/Federal_Register_Notices/2008/July/asset_up

load_file904_14998.pdf

21 See, for example, the submission of the

Recording Industry Association of America to

USTR, urging ISPs and other intermediaries

be required “to employ readily available

measures to inhibit infringement in

instances where both legitimate and

illegitimate uses were facilitated by their

services, including filtering out infringing

materials”, at

http://www.ustr.gov/assets/Document_Library

/Federal_Register_Notices/2008/July/asset_up

load_file476_14996.pdf

22 See comments of Peter Mandelson in the

European Commission press release, supra

n.8.

23 See, for example, Ermert, Monika. ACTA:

Negotiations Advance ‘Behind The Curtain’;

Many Concerns. August 2, 2008, at

http://www.ip watch.org/weblog/index.php?

p=1186

24 See European Commission Trade Directorate

General fact sheet on ACTA, at

http://ec.europa.eu/trade/issues/sectoral/intel

l_property/fs231007_en.htm

25 C-440/05 [2007] All ER (D) 338 (Oct).

26 Judgment, ¶ 66. Although the ECJ’s

decision’s by its terms was limited to

measures in the field of environmental

protection, its reasoning applies with equal

force to other areas of Community policy,

such as the free movement of goods and

the protection of intellectual property rights.

27 In response to a challenge to the

Commission’s competence to conclude

measures relating to IPRs in the context of

the WTO TRIPS negotiations, the ECJ held

that the authority to negotiate such

measures does not fall within the exclusive

competence of the Member States. Opinion

1/94 [1994] ECR I-5267.

28 See http://www.g8summit.go.jp/eng/doc/

doc080709_01_en.html

29 See USTR press release dated August 1, and

European Commission press release dated

31 July, available at

http://www.ustr.gov/assets/Document_Library

/Press_Releases/2008/August/asset_upload_fi

le308_15055.pdf and

http://ec.europa.eu/trade/issues/sectoral/intel

l_property/pr310708_en.htm

30 Id.

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